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					                              Business Case for Quality in Healthcare
                     Instructions for Using the Return on Investment Template

Proposed Use:
The return on investment (ROI) template was designed to allow payer organizations to retrospectively analyze the
ROI on quality enhancing interventions (QEIs).

Data Requirements:
Use of the template requires input of:
1. Personnel and non-personnel costs incurred in the planning and development phase of the QEI
2. Personnel and non-personnel costs incurred to support the on-going operation of the QEI
3. Paid claims for the intervention group at baseline (pre-intervention) and post-intervention, expressed on a per-
member, per-month basis
4. Number of member months per year for the intervention group
5. Number of months per year the QEI was operational



Optional Features:
The template allows for:
1. Entry of paid claims data for a control or comparison group
2. Discounting of cash flow estimates using the organizational opportunity cost of capital


Data Entry Instructions:
Green shaded cells are input cells which allow direct data input by users
Yellow shaded cells are intermediate calculations
 These cells contain formulas and should not be edited
Grey shaded cells are key outputs
 These cells contain formulas and should not be edited



Additional instructions can be found in the document, Using the Return on Investment Template, that
accompanies this EXCEL model.
                                                          Business Case for Quality in Healthcare
                                                 Initial Investment Costs of QEI (Prior to Implementation)
                                            Care of Adult Diabetics in a Medical Managed Care Organization
                                                                 Exemplar Health Plan
                                                                   Gotham, New York

                                                                                                 Reporting Period:                     9-1-2001 to 8-31-2002

Cost Category
Personnel                                                                                                                               Salary and
      Top Leadership                                         Name / Notes                                                 FTE %          Fringe                Cost
             Medical director                                                                                              5.00% $        250,000.00 $          12,500.00
             Principal investigator                                                                                       10.00%          115,000.00            11,500.00
             Quality director                                                                                              5.00%            75,000.00            3,750.00
             Chief Financial Officer                                                                                       1.00%          145,000.00             1,450.00
             Chief Information Officer                                                                                     1.00%          165,000.00             1,650.00
             Other leadership                                                                                              0.00%                                      -
      Research and Data Analysis
             Data analyst                                                                                                 15.00%            65,000.00            9,750.00
             Statistician                                                                                                  2.00%            75,000.00            1,500.00
             System analyst                                                                                                0.00%                                      -
             Other data and analysis                                                                                      10.00%            60,000.00            6,000.00
      Administrative
             Program manager                                                                                              10.00%            65,000.00            6,500.00
             Financial operations director                                                                                 0.00%                                      -
             Clerical outreach worker                                                                                      0.00%                                      -
             Outreach worker                                                                                               0.00%                                      -
             Rural outreach worker                                                                                         0.00%                                      -
             Consultant                                                                                                  100.00%            10,000.00           10,000.00
             Quality manager                                                                                               0.00%                                      -
             Support staff                                                                                                 0.00%                                      -
             Other administrative                                                                                          0.00%                                      -
      Clinical
             Nurse practitioner                                                                                             0.00%                                     -
             Nurse case manager                                                                                             0.00%                                     -
             Nurse educator                                                                                                 0.00%                                     -
             Medical management manager                                                                                     0.00%                                     -
             Intervention-specific clinical staff                                                                           0.00%                                     -
             Other clinical staff                                                                                           0.00%                                     -
Contracted services
     Training and education                                                                                                                                     15,000.00
     Other contracted services
Office operations
       Printing                                                                                                                                                  3,000.00
       Office supplies/postage                                                                                                                                     500.00
       Books/periodicals                                                                                                                                           400.00
       Travel/conferencing                                                                                                                                       2,000.00
       Training                                                                                                                                                  1,000.00
       Telephone                                                                                                                                                   200.00
       Other office operations                                                                                                                                     150.00
Equipment
     Computer hardware
      Software                                                                                                                                                     250.00
      Other equipment                                                                                                                                            3,000.00
Construction/renovation
Other initial costs                                                                                                                                                340.00
Subtotal direct costs, initial investment                                                                                                               $       90,440.00
Indirect cost percentage (if % of direct costs)                                                                                                                      45%
Indirect costs, initial investment*                                                                                                                             40,698.00

Total costs, initial investment                                                                                                                         $      131,138.00


Notes:
*If method for calculating indirect costs is other than as a % of direct costs, enter indirect cost amount here and note method of allocation
                                                                                                            Business Case for Quality in Healthcare
                                                                                                          Operating Costs of QEI (Post-Implementation)
                                                                                              Care of Adult Diabetics in a Medical Managed Care Organization
                                                                                                                   Exemplar Health Plan
                                                                                                                     Gotham, New York


                                                                                                                                                       Year 1                                    Year 2                                    Year 3
Cost Category                                                                                              Reporting Period:                    9-1-2002 to 8-31-2003                     9-1-2003 to 8-31-2004                     9-1-2004 to 8-31-2005
Personnel                                                                                                                                    Salary and                                      Salary and                                Salary and
         Top Leadership                                          Name / Notes                                                       FTE %      Fringe       Cost                    FTE %      Fringe       Cost              FTE %      Fringe       Cost
                  Medical director                                                                                                    5.00% $ 260,000.00 $ 13,000.00                  5.00% $ 270,400.00 $ 13,520.00            5.00% $ 281,216.00 $ 14,060.80
                  Principal investigator                                                                                             60.00%   119,600.00   71,760.00                 60.00%   124,384.00   74,630.40           60.00%   129,360.00   77,616.00
                  Quality director                                                                                                    0.00%                      -                    0.00%                      -              0.00%                      -
                  Chief Financial Officer                                                                                             3.00%     54,167.00   1,625.01                  3.00%    56,867.00    1,706.01            3.00%    59,733.00    1,791.99
                  Chief Information Officer                                                                                           0.00%                      -                    0.00%                      -              0.00%                      -
                  Other leadership                                                                                                    0.00%                      -                    0.00%                      -              0.00%                      -
         Research and Data Analysis
                  Data analyst                                                                                                         5.00%          71,500.00          3,575.00     5.00%     78,650.00          3,932.50     5.00%     84,942.00          4,247.10
                  Statistician                                                                                                        10.00%          77,250.00          7,725.00    10.00%     80,000.00          8,000.00    10.00%     75,000.00          7,500.00
                  System analyst                                                                                                       3.00%          92,000.00          2,760.00     3.00%     95,000.00          2,850.00     3.00%     97,600.00          2,928.00
                  Other data and analysis                        Programmer                                                            5.00%          65,250.00          3,262.50     5.00%     70,000.00          3,500.00     5.00%     74,500.00          3,725.00
         Administrative
                  Program manager                                                                                                     0.00%                                   -       0.00%                             -       0.00%                             -
                  Financial operations director                                                                                       0.00%                                   -       0.00%                             -       0.00%                             -
                  Clerical outreach worker                                                                                            0.00%                                   -       0.00%                             -       0.00%                             -
                  Outreach worker                                                                                                     0.00%                                   -       0.00%                             -       0.00%                             -
                  Rural outreach worker                                                                                               0.00%                                   -       0.00%                             -       0.00%                             -
                  Consultant                                                                                                        100.00%           12,000.00         12,000.00   100.00%     12,000.00         12,000.00   100.00%     12,000.00         12,000.00
                  Quality manager                                                                                                    20.00%           93,250.00         18,650.00    20.00%     96,048.00         19,209.60    20.00%     99,000.00         19,800.00
                  Support staff                                                                                                     100.00%           32,500.00         32,500.00   100.00%     33,475.00         33,475.00   100.00%     34,480.00         34,480.00
                  Other administrative                           Research Assistants                                                200.00%            5,000.00         10,000.00   200.00%      5,250.00         10,500.00   200.00%      5,400.00         10,800.00
         Clinical
                  Nurse practitioner                                                                                                250.00%           76,000.00     190,000.00      250.00%     79,060.00     197,650.00      250.00%     82,992.00     207,480.00
                  Nurse case manager                                                                                                100.00%           63,000.00      63,000.00      100.00%     64,890.00      64,890.00      100.00%     62,500.00      62,500.00
                  Nurse educator                                                                                                     25.00%           55,000.00      13,750.00       25.00%     56,100.00      14,025.00       25.00%     57,780.00      14,445.00
                  Medical management manager                                                                                          0.00%                                -          0.00%                          -          0.00%                          -
                  Intervention-specific clinical staff                                                                                0.00%                                -          0.00%                          -          0.00%                          -
                  Other clinical staff                                                                                                0.00%                                -          0.00%                          -          0.00%                          -
Contracted services
     Training and education
     Other contracted services
Office operations
         Printing                                                                                                                                                        2,350.00                                  1,575.00                                  2,475.00
         Office supplies/postage                                                                                                                                           650.00                                    680.00                                    720.00
         Books/periodicals                                                                                                                                                 502.00                                    512.00                                    356.00
         Travel/conferencing                                                                                                                                             2,540.00                                  1,536.00                                  1,795.00
         Training
         Telephone                                                                                                                                                         354.00                                    650.00                                    742.00
         Other office operations                                                                                                                                         1,530.00                                  1,760.00                                  1,200.00
Equipment
    Computer hardware
         Software
         Other equipment
Construction/renovation
Other initial costs                                                                                                                                                   1,463.00                                  1,980.00                                  4,500.00
Subtotal direct costs, operating                                                                                                                                  $ 452,996.51                              $ 468,581.51                              $ 485,161.89
Indirect cost percentage (if % of direct costs)                                                                                                                           45%                                       45%                                       45%
Indirect costs, operating*                                                                                                                                        $ 203,848.43                              $ 210,861.68                              $ 218,322.85

Total costs, operating                                                                                                                                            $ 656,844.94                              $ 679,443.19                              $ 703,484.74

Notes:
*If method for calculating indirect costs is other than as a % of direct costs, enter indirect cost amount here and note method of allocation
                                             Business Case for Quality in Healthcare
                           PMPM Paid Claims Baseline and Post Implementation - Intervention Group

                                 Care of Adult Diabetics in a Medical Managed Care Organization
                                                      Exemplar Health Plan
                                                        Gotham, New York

Actual Per Member Per Month Payments

Category of Claims                                         Baseline pmpm      Intervention Yr 1 Intervention Yr 2 Intervention Yr 3
Inpatient care                                                       1,056.23             956.48            927.34            958.52
Long term care, facility-based                                          25.34              26.35             28.90             32.14
Outpatient care                                                        298.75             265.26            257.31            268.57
Office-based care                                                      226.89             250.39            230.15            223.87
Emergency department care                                              150.32              76.52             73.20             69.21
Ambulance and emergency transportation                                  76.20              34.57             29.54             32.10
Home health care                                                       273.42             173.52            160.52            148.29
Pharmacy                                                               235.67             356.20            398.72            402.90
Other                                                                    2.13               3.14              6.15              7.58
Total                                                      $         2,344.95 $         2,142.43 $        2,111.83 $        2,143.18




Estimated Savings (Increase) from QEI


Per Member Per Month Savings (Increase) Over Baseline

Category of Claims                                                           Intervention Yr 1 Intervention Yr 2 Intervention Yr 3
Inpatient care                                                                            99.75            128.89             97.71
Long term care, facility-based                                                             (1.01)            (3.56)            (6.80)
Outpatient care                                                                           33.49             41.44             30.18
Office-based care                                                                        (23.50)             (3.26)             3.02
Emergency department care                                                                 73.80             77.12             81.11
Ambulance and emergency transportation                                                    41.63             46.66             44.10
Home health care                                                                          99.90            112.90            125.13
Pharmacy                                                                                (120.53)          (163.05)          (167.23)
Other                                                                                      (1.01)            (4.02)            (5.45)
Total Estimated PMPM Savings (Increase)                                       $          202.52 $          233.12 $          201.77
x Average Monthly Membership for QEI                                                         354               297               328
Total Estimated Monthly Savings (Increase)                                    $       71,692.08 $       69,236.64 $       66,180.56
x Number of Months QEI was Operational During Year                                             12                12                12

Total Estimated Savings (Increase)                                            $     860,304.96 $       830,839.68 $       794,166.72
                                            Business Case for Quality in Healthcare
                             PMPM Paid Claims Baseline and Post Implementation - Control Group

                                 Care of Adult Diabetics in a Medical Managed Care Organization
                                                      Exemplar Health Plan
                                                        Gotham, New York

Actual Per Member Per Month Payments
                                                              Control
Category of Claims                                         Baseline pmpm     Control Yr 1      Control Yr 2      Control Yr 3
Inpatient care                                                         -                 -                 -                 -
Long term care, facility-based                                         -                 -                 -                 -
Outpatient care                                                        -                 -                 -                 -
Office-based care                                                      -                 -                 -                 -
Emergency department care                                              -                 -                 -                 -
Ambulance and emergency transportation                                 -                 -                 -                 -
Home health care                                                       -                 -                 -                 -
Pharmacy                                                               -                 -                 -                 -
Other                                                                  -                 -                 -                 -
Total                                                     $            -   $             -   $             -   $             -




Estimated Savings (Increase) in Control Group


Per Member Per Month Savings (Increase) Over Baseline

Category of Claims                                                           Control Yr 1      Control Yr 2      Control Yr 3
Inpatient care                                                                          0.00              0.00              0.00
Long term care, facility-based                                                          0.00              0.00              0.00
Outpatient care                                                                         0.00              0.00              0.00
Office-based care                                                                       0.00              0.00              0.00
Emergency department care                                                               0.00              0.00              0.00
Ambulance and emergency transportation                                                  0.00              0.00              0.00
Home health care                                                                        0.00              0.00              0.00
Pharmacy                                                                                0.00              0.00              0.00
Other                                                                                   0.00              0.00              0.00
Total Estimated PMPM Savings (Increase)                                    $             -   $             -   $             -
                                               Business Case for Quality in Healthcare
                  PMPM Paid Claims Baseline and Post Implementation - Incremental (Intervention - Control)

                                  Care of Adult Diabetics in a Medical Managed Care Organization
                                                       Exemplar Health Plan
                                                         Gotham, New York

Actual Per Member Per Month Payments

Category of Claims                                           Baseline pmpm      Intervention Yr 1 Intervention Yr 2 Intervention Yr 3
Inpatient care                                                         1,056.23             956.48            927.34            958.52
Long term care, facility-based                                            25.34              26.35             28.90             32.14
Outpatient care                                                          298.75             265.26            257.31            268.57
Office-based care                                                        226.89             250.39            230.15            223.87
Emergency department care                                                150.32              76.52             73.20             69.21
Ambulance and emergency transportation                                    76.20              34.57             29.54             32.10
Home health care                                                         273.42             173.52            160.52            148.29
Pharmacy                                                                 235.67             356.20            398.72            402.90
Other                                                                      2.13               3.14              6.15              7.58
Total                                                        $         2,344.95 $         2,142.43 $        2,111.83 $        2,143.18




Estimated Incremental Savings (Increase) from QEI


Incremental Per Member Per Month Savings (Increase) Over Baseline

Category of Claims                                                             Incremental Yr 1 Incremental Yr 2 Incremental Yr 3
Inpatient care                                                                              99.75          128.89            97.71
Long term care, facility-based                                                              (1.01)           (3.56)           (6.80)
Outpatient care                                                                             33.49           41.44            30.18
Office-based care                                                                          (23.50)           (3.26)            3.02
Emergency department care                                                                   73.80           77.12            81.11
Ambulance and emergency transportation                                                      41.63           46.66            44.10
Home health care                                                                            99.90          112.90           125.13
Pharmacy                                                                                 (120.53)         (163.05)         (167.23)
Other                                                                                       (1.01)           (4.02)           (5.45)
Total Estimated Incremental PMPM Savings (Increase)                             $         202.52 $         233.12 $         201.77
x Average Monthly Membership for QEI                                                          354              297              328
Total Estimated Incremental Monthly Savings (Increase)                          $      71,692.08 $      69,236.64 $      66,180.56
x Number of Months QEI was Operational During Year                                              12               12               12

Total Estimated Incremental Savings (Increase)                                  $     860,304.96 $       830,839.68 $       794,166.72
                                                   Business Case for Quality in Healthcare
                                                        Return on Investment Analysis

                                      Care of Adult Diabetics in a Medical Managed Care Organization
                                                           Exemplar Health Plan
                                                             Gotham, New York

                                                                                                                    Discount Rate                   3%

                                                                                                Intervention Year                          Total
                                                          Pre-implementation         1                 2                  3              (All Years)
Investment in QEI
   Initial Investment Costs                              $        131,138.00
   Operating Costs                                                                 656,844.94        679,443.19         703,484.74
       Total Annual Investment Costs                              131,138.00       656,844.94        679,443.19         703,484.74
       x Present Value Factors                                          1.00             0.97              0.94               0.92
       Total Discounted Annual Investment Costs          $        131,138.00 $     637,713.53 $      640,440.37 $       643,788.19 $ 2,053,080.10

Savings (Increases) from QEI
  Estimated Utilization Increases                                              $          -    $            -    $             -
  Estimated Utilization Savings                                                    860,304.96        830,839.68         794,166.72
      Total Annual Savings (Increases)                                             860,304.96        830,839.68         794,166.72
     x Present Value Factors                                                              0.97              0.94               0.92
     Total Discounted Annual Savings (Increases)                               $   835,247.53 $      783,146.08 $       726,775.05 $ 2,345,168.67

Return on Investment Summary
Undiscounted Annual Net Cash Flows                       $          (131,138) $      203,460 $         151,396 $              90,682 $       314,400
Cumulative ROI                                                                           1.09              1.15                 1.14               1.14
Net Present Value                                                                                                                         292,088.57
Internal Rate of Return                                                                                                                         121%
                                                      Business Case for Quality in Healthcare
                                                                Return on Investment Analysis

                                         Care of Adult Diabetics in a Medical Managed Care Organization
                                                              Exemplar Health Plan
                                                                Gotham, New York

                                                                                                                              Discount Rate                   3%

                                                                                                          Intervention Year                          Total
                                                                    Pre-implementation         1                 2                  3              (All Years)
Investment in QEI
   Initial Investment Costs                                        $        131,138.00
   Operating Costs                                                                           656,844.94        679,443.19         703,484.74
       Total Annual Investment Costs                                        131,138.00       656,844.94        679,443.19         703,484.74
       x Present Value Factors                                                    1.00             0.97              0.94               0.92
       Total Discounted Annual Investment Costs                    $        131,138.00 $     637,713.53 $      640,440.37 $       643,788.19 $ 2,053,080.10

Incremental Savings (Increases) from QEI
   Estimated Incremental Utilization Increases                                           $          -    $            -    $             -
   Estimated Incremental Utilization Savings                                                 860,304.96        830,839.68         794,166.72
       Total Annual Incremental Savings (Increases)                                          860,304.96        830,839.68         794,166.72
      x Present Value Factors                                                                       0.97              0.94               0.92
      Total Discounted Annual Incremental Savings (Increases)                            $   835,247.53 $      783,146.08 $       726,775.05 $ 2,345,168.67

Incremental Return on Investment Summary
Undiscounted Annual Net Cash Flows                                 $          (131,138) $      203,460 $         151,396 $              90,682 $       314,400
Cumulative ROI                                                                                     1.09              1.15                 1.14               1.14
Net Present Value                                                                                                                                   292,088.57
Internal Rate of Return                                                                                                                                   121%

				
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